December2013,IDC#244611

White Paper
ERP in the Cloud and the Modern Business
Sponsoredby:Oracle
MichaelFauscette
December2013
EXECUTIVE SUMMARY
Chooseyourcloudvendor,deploymentmodel,andapplicationwisely.SaaSandcloudapplications
havemovedintothemainstreamofenterpriseITstrategy.Whatstartedwithapplicationsinhighly
containedfunctionslikesalesforceautomation(SFA)andtalentmanagementisnowspreadingtoa
broadsetofenterpriseapplicationsincludingenterpriseresourceplanning(ERP),anarealong
thoughttobeoutsidetheenvelopeforenterpriseITclouddeployment.Theavailabilityofflexiblecloud
deploymentmodels,whichrangefrompubliccloudtoprivatecloudandevenhybriddeployment
modelsthatcombineboth,hascapturedtheinterestofbusinessesofallsizes.RecentIDCsurveys
showanincreasinginterestinchoosingtooperateERPinthecloud.
Companiesareunderpressurefromtheeconomy;changingtechnology;changingcustomer,
employee,andpartnerexpectations;andtheneedtocompeteinanincreasinglycomplexconnected
globaleconomy.Toadequatelyrespondtothesepressures,businessesarelookingtousetechnology
astheleverforandtheunderpinningofnew,innovativeapproachestobusiness.Thecloudisacritical
partofthatstrategyformostbusinessesandsupportsotherkeytechnologieslikemobility,decision
supportsystems,andcollaboration/socialsystems.
BymovingERPsystemstothecloud,companiescangainanassortmentoftechnologicaland
businessbenefits.EnterpriseITisembracingcloud-basedERPformanyreasons,including:
Availabilityofmorerobust,feature-richERPcloudapplicationsfromestablishedandtrusted
enterprisesoftwarevendors
Easeofdeployment
Payforonlywhatyouuse
NeedtoshiftITinvestmentsfromthecapitalbudgettotheoperatingbudgettocloseralign
businessbenefitswithcashoutflow
Freevaluableresourcesfrommaintaininglegacysoftwareandinfrastructuretofocuson
higher-valueandinnovation-drivenactivities
Quickerdeploymentsleadingtofastertimetovalueandfreeingupresourcesformore
strategicinitiatives
Moreflexibleandscalablesolutionstoprovidelong-termsupportforgrowthandexpansion
Asmoreenterpriseapplicationsresideinthecloud,havingacloud-basedERPsystemcan
simplifyintegrationandeliminatedatasilos
2013IDC #244611 2
Businessesarerealizingthatthecloudisthefutureofenterprisesoftwareandoffersmanyattractive
businessbenefits.Amongthemostcompellingare:
Moremodernuserexperiences(UXs)thatincreaseproductivityandemployeesatisfaction
Embeddedanalyticstosupportmoreeffectivereal-timebusinessdecisions
Embeddedsocialcollaborationtoolstoincreasecollaborationandproductivity
Pervasivemobileaccesstoapplicationservices
Easeoffindingandsharinginformationtosupportcollaborativedecisionmakingandincrease
productivity
Userself-servicetosimplifyprovisioningandsystemadministration
Abilitytomoreeffectivelytieback-officesystemsintothefrontofficetosupportthecompany's
customerexperiencestrategy
Eliminatingdataandpeoplesilostomakemoreeffectivebusinessdecisionsmorequickly
Improveandshortenthefinancialcloseprocessthroughbetteraccesstodataandembedded
collaboration
Balancethecompany'sfinancialneedsbetweencapitalandoperatingbudgets
Formidsizecompaniesonafastgrowthpath,therecanbeadditionalbenefitsfrommakingan
informedandstrategicdecisionwhenitcomestoERPsystems.Oftenthesecompanieschoose
somethingthatisscaleddowntoomuchinsteadofchoosingafullymature,enterprise-classERP
system.Whilesuchasystemmightfittoday,itwon'tkeepupwiththerapidchangethatoccursin
growingbusinesses.Ineffect,businessesarerequiredtogothroughtwoimplementationprocesses,
whichtheycouldhaveavoidedbyselectingasystemwiththeflexibility,scalability,andheadroomto
accommodatetheirgrowth.
SaaS and the Cloud
Cloudcomputingandsoftwareasaservice(SaaS)aredisruptingthewaybusinessesdeployanduse
enterprisesoftware,aswellasopeningupnewwaystocreatebusinessvalueandcompetitive
advantage.SaaS,whichhasbeenaroundsincethelate1990s,hasevolvedrapidlyandisbecoming
thestandardformanyITorganizationsfordeliveringnewapplications.Bydefinition,SaaSisaturnkey
service,withapplication,presentation,anddatatiersandallassociatedservicesinasingleservice
thatcanbeaccessedandprovisionedovertheInternet.Traditionalmodelsbasedonperpetual
licensedapplicationsdeployedon-premisesorhostedinthird-partydatacentersstillmakeupalarge
percentageofthesoftwareusedbybusinessestodaybutarebeingreplacedbycloud-based
applicationsonaregularbasis.
Beforewetakeadeeperlookatcloudapplicationsthough,it'susefultostandardizethediscussion
withaclearsetofcriteriaforexactlywhatfitsunderthecloudapplication"umbrella."IDC'scriteriafor
cloud,whichareusedthroughoutthiswhitepaper,areasfollows:
Shared,standardservicethatiseitherpublicorprivate
Solution-packagedturnkeyofferingthatintegratesrequiredresources
2013IDC #244611 3
Self-serviceprovisioningandadministration(mayrequiresomeonboardingsupport)
Elasticscalingthatisdynamicandfinegrainedtooptimizeperformance
Use-basedpricingthatsupportsservicemetering(butprivatecloudmaynotchargeback)
AccessibleviatheInternet
Standarduserinterface(UI)technologies
Publishedserviceinterface/APIbasedonWebservicesorothercommonInternetAPI
technology
Traditionalenterprisesoftware,particularlyERPapplications,wasmostoftendeployedinintegrated
suitesinthepast,eitherinon-premisesdatacentersorinthirdpartyhostedfacilities.Butwithtougher
economicconditions,agrowingneedtoleveragetechnologyasacompetitiveadvantage,andhigher
cloudacceptanceintheenterpriseingeneral,traditionalmodelsarechanging.Manyorganizationshave
movedtoahybridITmodelwithbothcloudandon-premisesapplications,oftenwithkeynewersoftware
assetsdeliveredasSaaS.Whenpurchasingnewsoftwaretoday,companiesespeciallylarge
enterprisesmostoftenarelookingforbest-of-breedmodularsoftwarethatiscloudbasedandmodern
andthatcanaddthemaximumamountofvaluetothebusinessintheminimumamountoftime.
Initially,whenSaaSapplicationswereofferedasanalternativetoon-premisesdeployments,which
wasover14yearsago,theywerenotreadilyacceptedbyITorganizations.SaaSapplicationswere
mostsuccessfulatfirstincontainedorganizational/functionalareaswheretheline-of-business(LOB)
buyercontrolledthebudgetandcouldmakethedecisionindependentofIToratleastwithlittleIT
involvement.SFAandtalentmanagement,forexample,wereearlysuccessesusingthisLOB
approach.Slowlyovertimethough,SaaSandcloudcomputinghavemovedintothemainstreamofIT
operationsandareincreasinglybecomingpreferredalternativestoon-premisesdeployments.Infact,
over60%ofcompaniessurveyedbyIDCreportedthattheywerealreadyusingorhadfirmplansto
usecloudservices(IDC'sCloudTrackSurvey,October2013,n=1,109).Thesamesurveyshowed
that31%ofqualifiedcompaniesreportedthattheywanttohaveabroadlyimplementedcloud-first
strategythatisproactivelymanagedandisclearlydrivingbusinessinnovationwhileimprovingIT
operationalefficiencyinthenext24months.Inaddition,thesurveyedcompaniesresponded
consistentlyregardlessofgeographicregion.
2013IDC #244611 4
Thisnewfoundmainstreamacceptanceofcloudalsoledmanycompaniestolookbeyond
departmentalapplicationslikeSFAandtalentmanagementtocollaboration,marketing,customer
service,andevencoreapplicationslikefinancials/accountingandsupplychain.Figure1showsthe
increaseofcloud-basedapplicationtypesacrossmultipledeploymentmodels.
FIGURE 1
Percentage Change in the Use of Applications in Five Deployment Categories
Over the Next 24 Months

n=1,109
Source:IDC'sCloudTrackSurvey,October2013

-5.5%
3.8%
1.7%
-6.5%
4.7%
1.8%
-6.8%
5.5%
1.3%
-6.8%
4.3%
2.5%
-7.0%
5.1%
1.9%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Conventional deployment Private cloud Public cloud
CRM applications (call
center/contact center)
CRM applications (marketing
automation/sales automation)
Enterprise resource planning
(financial/accounting
applications)
Enterprise resource planning
(human resource applications)
Supply chain and logistics
2013IDC #244611 5
AsFigure1illustrates,thereisrapidlyincreasinginterestinabroadsetofapplicationsacrossallthe
clouddeploymentmodels.ERPfinancialsisstronginprivateandpubliccloudwhilerapidlydecreasing
inconventionalonsitedeployments.WhencompaniesinIDC'srecentCloudTrackSurveywereasked
abouttheuseofspecificapplicationsinthepubliccloud,theyreportedincreaseduseacrossseveral
applicationtypes,includingERP.Figure2showsthemostusedapplicationsinthepubliccloud.
FIGURE 2
Most Used Applications in the Public Cloud (% of Respondents)

n=1,109
Source:IDC'sCloudTrackSurvey,October2013

The Cloud Business Advantage

Businessesareunderextremepressuretochangefromavarietyofeconomicissuesaswellasnew
technologiesthatcreatesignificantbusinessopportunities.Sincethe2008globalrecession,the
economyhasforcedcompaniestodomuchmorewithalotless,andthatneedtobeincreasingly
productivewithashrinkingworkforceisleadingcompaniestolookfornewwaysofworkthatgo
beyondwhatautomationcanyield.The"consumerizationofIT"trendhaschangedthepaceof
21.2%
20.9%
19.6%
19.3%
18.9%
17.5%
18.0%
18.5%
19.0%
19.5%
20.0%
20.5%
21.0%
21.5%
CRM applications
(marketing
automation/sales
automation)
CRM applications
(call center/
contact center)
Supply chain and logistics Enterprise resource
planning (human
resource applications)
Enterprise resource
planning
(financial/accounting
applications)
2013IDC #244611 6
innovationandhasmovedthesourceofinnovationawayfromtheenterpriseandcreatednew
expectationsfortechnologyfromemployees,customers,andpartners.Underlyingmostofthe
changesistheInternet,combinedwiththerapidincreaseinnumberandcapabilityofmobiledevices,
growingfocusonusingthemassiveamountsofdatatosupportmoreeffectivedecisionmaking,and
newwaysofnetworkingandcollaboratingthatarespillingoverfromthepersonalsocialWeb.
Employeesareclamoringtoworkdifferentlyandwithtoolsthatlookandfunctionliketheirpersonal
Webexperiences.Theneedtoworkcollaborativelyandtobringpeopleanddatatogetherinawork
contextischallengingtraditionalERPsystems.Customersarelookingforbetter,moreindividualized
experiencesfrombrandstheyinteractwithonarecurringbasis.Theconceptofcustomerexperience
startstoexpandwhatwasconsidered"customerfacing"toincludeback-officefunctionsthatmust
functioneffectivelyorriskcreatinganegativeexperience.Activitieslikecorrectlyinvoicingcustomers
ontimeorshippingthecorrectproductwhenexpectedarecrucialtoensuringthatthecustomer
experiencemeetscustomerexpectations.Evenpartnersarelookingforanew,higherlevelof
connectedrelationshipthatleveragesmodernWebtechnologies.
Companiesarestrugglingtofindnewwaystostaycompetitiveandincreaseproductivityinthis
changingenvironmentwhiledealingwiththesystemchallengestosupportnewactivitiesthatare
createdbyoutdatedandinflexibletechnologies.Forseveralreasons,ERPcloudbasedsystemscan
helpclosethetechnologygap.ModernERPcloudbasedsystemshaveanupdateduserexperience,
embeddedcollaborativecapabilities,andembeddedanalyticstosupportreal-timedecisionmakinga
criticalactivityintoday'sfast-pacedbusinessenvironment.
Collaborationisabigpartofthenewwayworkgetsdoneinbusiness.Havingtherighttoolsto
facilitatecollaborativeactivitiesisahighpriorityformostcompaniestoday.IDC'sSocialBusiness
Survey,conductedinFebruary2013(n=701),showedthat79%ofbusinesseshavealreadydeployed
sometypeofenterprisesocialnetwork(ESN).Socialcollaborativetools,orenterprisesocialnetworks,
areessentialtoolsforcreatingacollaborativeenvironmentforemployeesandaremosteffectivewhen
embeddedinsideERPapplicationsattheworkflowlevel.SomeERPcloudbasedsystemsnowhave
embeddedESNcapabilities.Buildingcollaborativeenterpriseprocessesextendsacrossallbusiness
functions.Incustomerservice,it'sessentialforrepresentativestocollaborateinrealtimewithsales,
shipping,andfinancetoresolvecustomerissuesandensureapositivecustomerexperience.Inthe
backoffice,thereisalmostnomorecollaborativeprocessthanthemonthly,quarterly,andyear-end
closeprocessesthatconsumeconsiderabletimefromavarietyofresources.AnESNisextremely
valuableinstreamliningthecloseprocess.
Therearemanyreasonswhyenterprisecloudapplicationsaddextravalueandbenefit.Cloud
deploymentscanmakeresourcesavailableforcorebusinessactivitiesinsteadofapplication
management.Thesystemstendtobemoremodernandincludethekeyfeatureslistedpreviouslyas
wellasembeddeddecisionsupport.Theyalsotendtobemoreflexible,moreeasilyadaptedto
changingbusinessrequirements,andmorescalable.
2013IDC #244611 7
ERP Cloud
ItmaybesurprisingtosomethatcompaniesaremovingcoreERPsoftwaretopublicandprivate
clouds.SmallandmidsizecompanieshavedeployedpublicERPcloudsuitesforsometime,butin
largeenterprises,thisisarecentdevelopmentthatisgainingsignificantmomentum,mostnotablyasa
two-tierERPstrategyforsubsidiarieswherethefinancialconsolidationisstilldoneatthecorporate
levelviatraditionalon-premisesERPsuites.
Thechoiceofpublic,private,orhybridcloudisastrategicbusinessdecisionandshouldbeexamined
closely.Therearebenefits,costs,andriskswitheachmodelaswellasregulatoryandcompliance
issuesthatvarybyindustry.Formoredetailsonthesebenefitsandrisks,seetheChallengesand
OpportunitiesforCloudApplicationssection.
Whencompanieslookatthecloud,therearemanyfactorsthatinfluencethedecisiontomoveallor
someoftheirapplicationstothepubliccloud.Figure3highlightsthetop5drivers.
FIGURE 3
Top 5 Reasons for Moving to the Public Cloud (% of Respondents)

n=1,109
Source:IDC'sCloudTrackSurvey,October2013
41.3%
40.5%
40.4%
40.3%
39.0%
37.5%
38.0%
38.5%
39.0%
39.5%
40.0%
40.5%
41.0%
41.5%
Get access to the newest
functionality faster
Increase revenue by
enabling us to build new
revenue-generating
products and services
faster
Improve resource
utilization
Reduce the total size
of IT budget
Give business units more
direct control over
sourcing their own IT
solutions
2013IDC #244611 8
Whilethesedriversapplygenerallyacrosscompaniesofallsizes,therearesomedistinctdifferences
betweenenterprisesandmidsizecompaniesinthewaytheybuyanddeployanERPcloudsolution
andinthedriversandbenefits.
ERP Cloud in Large Enterprises
Largecompanieshaveusedawidesetofsoftwareproductsformanyyears,soit'snosurprisethat
ERP,generallydeployedon-premisesorhosted,isthenorm.Thesesystemsrangefrominternally
developedsolutionstofullyintegratedsuitesprovidedbythird-partyvendors.Thesolutionsalsovary
greatlyinage,capabilities,andlevelofcomplexity.ManyITorganizationsarealreadyoperatingina
hybrid(mixofcloudandon-premises)model,havingdeployedoneormoreofthemorespecific
solutionslikesalesforceautomationortalentmanagementinthecloud.Sowhyarecompanies
embracingERPcloudnow?Thereareseveralreasons,including:
Availabilityofmorerobust,feature-richERPcloudapplications(bestofbreed)from
establishedandtrustedenterprisesoftwarevendors
Easeofdeployment
Availabilityofmoreaffordableandmanageableupgrades
Payforonlywhatyouuse
AllowsshiftingITinvestmentsfromthecapitalbudgettotheoperatingbudgetinatight
economicenvironment
Increasingcostsofmaintainingon-premisessolutionsandcustomizations
Subsidiariesoracquiredcompaniesquicklyintegratingfinancialsintothecorporaterollupand
financialclose
Quickerdeploymentsleadingtofastertimetovalueandfreeingupresourcesformore
strategicinitiatives
Moremodernuserexperiences
Embeddedanalytics
Embeddedsocialcollaborationandnetworkingtools
Easeofsharinginformation
Userself-service
SimplifyoverallITenvironment
Standardizeonspecificplatform
Moreflexibleandscalable
2013IDC #244611 9
Ratherthanacompletereplacementstrategy,manyenterpriseselecttomovemodulebymodule,
organizationbyorganization,orsubsidiarybysubsidiaryovertime,operatinginahybridenvironment
foranundeterminedperiod.Thisapproachallowscompaniesgreaterflexibilityinprioritizingthe
businessareasthatwillyieldthegreatestbusinessbenefitsfirstwhilecontinuingtousesomesystems
thatareadequatefortheircurrentbusinessneeds.Theexactmixofhybridapplications,which
applicationsaremovedandinwhatorder,variesbyindustryandbyindividualcompany.
Anexamplescenariomightmakethisclearer.Takealargeretailcompanythatisalreadyrunningina
hybridenvironment.Thecompanyisrunningalegacyon-premisesERP,amixofon-premisesand
cloudretailverticalapplications,andhasalreadymovedtalentmanagement,acustomercommunity
platform,socialmediamonitoringandresponse,andcustomerservicesolutionstothecloud.The
companyhasafewbusinessissuesthatcouldprovidetheincentivetomovefinancialstothecloudas
well.Thecompanyhasacquiredthreedifferentcompetitors'operationsoverthepasttwoandahalf
yearsandisnowrunningfourdifferentfinancialsystems,allon-premisesinitsowndatacenter.Forthe
monthly/quarterly/annualcloseprocess,thecompanymanuallyconsolidatestheoutputofthethree
acquiredsystemsinitscurrentcorefinancials,greatlylengtheningthetimeforclosingandincreasing
bothcomplexityandopportunityforerror.Thecompanycouldconvertthethreeacquiredbusiness
unitstothelegacyon-premisescoresystem,butthesystemwasimplementedoversevenyearsago,
andwhileitisfunctionallycurrent,ithasanoutdatedUI,itdoesn'thaveanycollaborativecapabilities,
andalargenumberofITstaffareneededtomaintainthesystemanditsrequiredinfrastructure.
Insituationslikethis,themosteffectivedecisionmightbetomovealltheacquiredbusinessunitsand
corporatetoanewcloud-basedfinancialsystem.Thiseliminatesthecloseproblemswhileyielding
manyadditionalbusinessbenefits.Thenewsystem,ifselected,couldprovideamodernUIandUX;it
couldaddembeddedcollaborationcapabilitiestofacilitatefastercloseprocessesandamore
collaborativeworkenvironment.Aconsolidatedandintegratedcloudsystemwouldhelpeliminate
errorsfromantiquatedmanualprocessesandcouldhelpeliminatethedatasiloscreatedbytheolder,
unintegratedsystemsamongtheoperatingunits.Themoveawayfromon-premisescouldfreeupIT
resourcestofocusonhigher-valueopportunities.Andperhapsmostimportantly,thenewsystemcould
providemodernanalyticsthataredistributedinsidethesystemworkflowtofacilitatebetter,more
timely,andmoreaccuratebusinessdecisions.Thecompanywouldcontinuetouseothersystems
on-premises,integratethemintothenewcloudfinancials,and,whenappropriateforthebusiness,
movetheothersystemstothecloudaswell,operatinginahybridmodelforaslongasitmadesense
forthebusiness.
ERP Cloud in Midsize Organizations
Thesituationformidsizeorganizationsissomewhatdifferentfromthesituationforlargeenterprises.
Notthatthebusinessneedsareparticularlydifferent;infact,midsizeorganizationshaveallofthe
sameneedsoflargeenterprisesbutinaseverelyresource-constrainedenvironment.Inaglobal,
connectedeconomy,almosteverybusinessmustbeabletocompeteonnewlevels.Technologyisthe
greatequalizerformanyofthesebusinesses,andcloudisprovingtransformativeformanyofthem.
2013IDC #244611 10
Ingeneral,midsizecompaniesapproachtheprocessofselectingandimplementinganewERP
systemfromaverydifferentperspectivethanlargeenterprises.Manymidsizecompaniesdon'thave
complete,integratedsystemsbutinsteadhaveamixedassortmentofpointsolutions.Midsize
companiesalsooftenhavesomeapplicationsalreadyinthecloud,muchlikeenterprises,although
thosesystemsareoftenoperatedinasilo.Overthepast10years,thesebusinesses,whenfacedwith
newcompetitiveandeconomicpressureandtheneedtogainbetterbusinessvisibility,havemadethe
decisiontodeployfullcloud-basedERPsystemsratherthanreplacecurrentsystemsmoduleby
moduleasisthecurrentnormforlargerenterprises.
InselectinganERPsystem,manymidsizecompanieswouldseegreatadvantagefromdeployinga
complete,integratedERPcloudbasedsystem.Inparticular,thefollowingbenefitsareoftenthemost
importanttoamidsizecompany:
Easeandspeedofimplementation
Noneedtopurchaseexpensivehardwareandsoftwaretosupportthenewsystemsandno
needtoallocatededicatedpersonneltomaintaintheinfrastructureonceitisinoperation
Lowercostbarrierstoentry;implementationcostsareloweranddeployingapay-as-you-go/
subscriptionmodelERPsystemfreesupscarcecapitalformorecriticalbusinessinvestments
Complete,integratedsystemthatprovidesbestpracticebusinessprocesses"outofthebox"
tostreamlineandoptimizeoperations
Bettermanagement/executivedecisionsupportandcontrolbyeliminatingdatasilosand
providingmoreeffectiveanalyticsandreportingtools
Asbusinessesarescalingup,therecanbeadditionalbenefitsfrommakinganinformedandstrategic
decisionwhenitcomestoERPsystems.Manymidsizecompaniesareonastronggrowthpath,but
insteadofchoosingafullymature,enterprise-classERPsystem,theychoosesomethingthatisscaled
downtoomuch.Whilesuchasystemmightfittoday,itwon'tkeepupwiththerapidchangethatoccurs
inagrowingbusiness.Ineffect,businessesarerequiredtogothroughtwoimplementationprocesses,
whichtheycouldhaveavoidedbyselectingasystemwiththeflexibility,scalability,andheadroomto
accommodatetheirgrowth.Thisisespeciallyimportantforfinanceorganizationsthatcanfind
themselvesdoingtwoaccountingconversions/migrationsinsteadofonlyone.Byselectingan
enterprise-classERPcloudbasedsystem,financeorganizationscanavoidtwoaccountingmigrations
andgetasolutionthatprovidesmanyothercapabilitiestomeetfutureneeds.

2013IDC #244611 11
CHALLENGES AND OPPORTUNITIES FOR CLOUD APPLICATIONS
MovingtoERPcloudbasedsystemsnotonlyhasmanybenefitsbutalsoisaccompaniedbysome
challengesthatneedtobeaddressed.Dependingonacompany'sbusinessgoals,therearealso
opportunitiestooptimizethevalueoftheclouddeploymentinseveralways.WhenchoosinganERP
cloudbasedsystem,companiesneedtomakekeydecisionsandevaluatespecificcriteria.In
particular,companieshaveseveralelementstoconsiderwhenchoosingadeploymentmodel,even
aftertheyhaveselectedacloudoptionoveron-premises.Therearealsolingeringreservationsand
concernsaroundthepubliccloudingeneralamongenterprises(seeFigure4).
FIGURE 4
Top 6 Inhibitors for Considering Public Cloud Services (% of Respondents)

n=1,109
Source:IDC'sCloudTrackSurvey,October2013

Ineachofthedeploymentmodels,thereareadvantagesandtrade-offs,whicheachbusinesshasto
examineandevaluateinthecontextofbusinessgoals,regulatoryrequirements,risks,andneeds.
Table1presentssomeofthefactorstoconsiderforeachmodel.
49.0%
35.3%
32.9%
32.3%
31.0%
30.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Security concerns Regulatory or
compliance issues
Reliability concerns
in terms of service
availability
Concerns cloud
cannot support
the operational/
performance
requirements of
critical applications
IT governance issues,
including challenges
related to defining
standard services
and SLAs
Immaturity of cloud
it is a new
technology
2013IDC #244611 12
TABLE 1
Factors to Consider for Public, Private, and Hybrid Deployment Models
Public Cloud
Factor Advantage Trade-Off
Publiccloudvendordatacenterstendtohavehighersecurity
qualifications/certificationsthanprivatedatacenters

Formanybusinesses,thereisanadvantageinshiftingbudgetfromcapital
expensestooperatingexpenses(thisisnotalwaystruethough,depending
onabusiness'sfinancialplan,capitalposition,andsoforth)

Areelasticandcanscaleondemandwithoutthebusinesshavingto
purchasenewhardwareorreservecapacity,whichgivesthebusinessthe
capabilitytodealwithdemandspikesveryeffectivelyandefficiently

Providetheabilitytoshiftresourcesawayfromdatacenterand
non-value-addinfrastructureoperation/maintenancetoprojectsthatare
strategictothebusinessandprovidegreaterbusinessvalue

Moregranularbillingandtrackingcapabilities,payforonlywhatyouuse

Accesscanbegrantedfromanywhere

Greaterprotectionfromhardwarefailures

Althoughasecureconnectionisused,yourdatastill"travels"overtheInternet

Whendeployedinavirtualizedcloudenvironmentversusmultitenant
cloud,itoffersgreaterdatasecurity,privacy,andcontrolsincethe
virtualizedenvironmentisolatescompanyinformationeventhoughthe
physicalresourcesareshared

Dependingonthevendor,youdon'tknowwhereyourdataresides
physically;thismaybearegulatoryissueinsomegeographies

Youdependontheexpertiseandqualityofthevendoranditsecosystem,
whichcouldbeapositiveornegativedependingonyourvendorselection

Generally,thepubliccloudvendoroffersgreaterredundancyandlocation
diversity,whichoffersgreaterdisasterprotection

Applicationsinthepubliccloudtendtobeconfigurabletodifferent
degreesdependingonthevendorandthevendor'splatformbutgenerally
arelesscustomizable
Potentially

Moderncloudappsarebuiltonrobustplatformasaservice(PaaS)that
willsupportcustomextensionsandfeatures

Youarealwaysonthelatestreleaseofthesoftware

Yougenerallyhavenoorlittlecontroloverthetimingofupgrades

Avirtualizedcloudenvironmentgivesyoualotmorecontroloverupgrade
rolloutsversusmultitenantmodels

2013IDC #244611 13
Private
Factor Advantage Trade-Off
Offersthehighestlevelofcontrolsinceyouareoperatinginyourown
datacenterandonyourownhardwareandinfrastructure(unlessyoupay
athirdpartytohostforyou,whichstillgivesyouthesamelevelof
operationalcontrol,justnotphysicalcontrol)

Requirestheoutlayofcapitalresourcestoacquireandsetupthe
datacenters,applications,andsoforth

Requiresyoutostaffandoperatetheinfrastructureanddatacentersor
payathirdpartytodosoonyourbehalf

Givesyouthehighestlevelofcontroloverprivacyandsecurityissues
Tomanagethecontrolandsecurity,youhavetoprovidetheexpertise
yourself(andtodaythetoptalentoftengoestocloudvendors,whichcan
affordtopayapremiumformission-criticalskills)

Islesselasticorrequiresalotofexpensiveoverheadtokeepreserve
capacitytoprotectyouagainstdemandspikes

Offersthehighestlevelofcustomization
Thepriceofcustomizationsisthatyouwillneedtodealwiththemyourself
ifandwhenyouupgrade

Isnotupgradedwiththesamefrequencyasapublicoravirtualprivate
application,soitoftenlagsincurrentfeatures/functionalityandnew
technologicalcapabilities

Hybrid
Factor Advantage Trade-Off
Higherdegreeofcomplexitythatmustbemanaged

Ingeneral,sharestheadvantagesandtrade-offsofboth
publiccloudandprivatecloud

Source:IDC,2013

Hybridcanbeatransitionalstageasacompanyexecutesonalong-termstrategytoshiftfromone
modeltoanother(e.g.,on-premisestopubliccloud)orapermanentoperatingstate.Thisisthemost
commonmodelintheenterprisetoday.
Inadditiontothesechallenges,opportunities,risks,andneeds,therearetwomoreissuesthat
companiesshouldexaminewhenmakingcloud-relateddecisions:thematurityoftheecosystem
aroundavendoranditsofferingandthematurityoftheapplicationandthesupportingtechnology,
infrastructure,andoperations.
2013IDC #244611 14
Ecosystem Maturity
Foron-premises/traditionalapplications,ithasalwaysbeenimportanttoassociatewithavendorthathas
acompleteecosystemarounditsproducts.Thisrequirementdoesnotgoawayintheothermodels
discussedinthiswhitepaper;infact,itmightbemoreimportantgoingforward.It'sessentialtoanswerthe
followingquestions:Howmuchexpertiseisavailablefromsystemsintegrators,consultants,andvalue-
addedresellers(VARs)tohelpimplement,configure,train,andoperatethenewsystem?Isthevendor
platformknown?Isthereexpertisetosupportsoftwareextensions,customizations,andcustom
applicationneeds?Arobustecosystemisagoodindicationofthehealthofthesolutionandthevendor.
System Maturity
Inadditiontotheecosystem,companiesneedtolookatthesolutionitself.Manycloudapplicationsareon
fairlynewreleases,socaremustbeexercisedtomakesurethereisagoodfitfromafunctionandfeature
standpoint.Themorematureaproduct,themorelikelythatitincludesthenecessaryfunctionality.Beyond
maturitythough,doesthesystemusemoderntechnologyandmeetmodernstandards?Theothertypeof
maturityisbasedonlineage.Istheapplication/solutionbasedonlong-provenfeaturesandbest-in-class
workflow,processes,andfunctionswhileaddingmodernUXandothercriticalmoderntechnology?Thisis
agoodblendofnewandmodernwithprovenandfeaturerich.
CONCLUSION
Thereismuchtothinkaboutwhenevaluatingthepotentialmovetoacloudmodel,especiallyforcore
systemslikeERP.Morecompaniesaremovingtosometypeofcloudmodelforavarietyofenterprise
applications.Cloudmodelsoffermanybenefits,andeachmodelhasitschallengesandrisks.Each
businessisdifferent,andwhenchoosingavendor,adeploymentmodel,andanapplication,
companiesmustweighallofthepotentialbenefits,challenges,andriskscarefullytofindtheoptimal
solutionfortheirbusinesssituation.
WhileapplicationsoutsidethecoreERPfunctionalareasweregenerallythefirstonthemarketandthe
firsttogainwidespreadadoption,thisischanging.Overthepastfewyearsandforavarietyofreasons
rangingfromeconomicpressurestoproductavailabilityandmaturity,moreenterpriseITorganizations
arelookingtoERPinthecloudasthenextareatobenefitfromtheshift.ERPcloudisprovingtobe
moreflexible,moreadaptable,andmoremodernkeyreasonsintoughcompetitiveenvironments.
Theflexibilityofclouddeploymentmodels,rangingfrompublictoprivatetohybrid,offerstheabilityto
craftadeploymentandlicensingstrategythatprovidesthebenefitsofERPcloudbutinwaysthatcan
betailoredforeachindustry'sregulatoryandcomplianceneedsaswellasthediversityofgeographic
regulatoryrequirements.
SomefactorstoconsiderwhenevaluatinganERPcloudbasedsolutionare:
ModernUX
Embeddedcontextualanalytics
Embeddedenterprisesocialnetwork/collaborationtools
2013IDC #244611 15
Multiple/flexibledeploymentoptionsandtheabilitytomovebetweentheoptionsasbusiness
needsdictate
Unifiedcloudplatformwiththeabilitytodocustomextensionsandintegrations
Openstandards
Easeofsharinginformation
Easeofintegration
Dynamicscaling(upanddown)
Metering
Ecosystemmaturity
Systemmaturityandlineage
ERPinthecloudisthefutureofenterprisesoftwareandoffersmanyattractivebusinessbenefits.
Amongthemostcompellingare:
Easeofdeployment,loweringcostsofimplementation,andreducingoverallbusiness
disruption
Flexibilitytochoosethebestdeploymentmodelforthecompany'sbusinessneeds
AbilitytogetamodernUX,whichcanincreaseproductivityandemployeesatisfaction
Abilitytoputinplacesystemsthatsupportcollaborationanddecisionsinsidetheworkflowand
inrealtime
Abilitytomoreeffectivelytieback-officesystemsintothefrontofficetosupportthecompany's
customerexperiencestrategy
Balancethecompany'sfinancialneedsbetweencapitalandoperatingbudgets
Asmoreenterpriseapplicationsresideinthecloud,havinganERPcloudbasedsystemcan
simplifyintegrationandeliminatedatasilos
Abusinessthatwantstostaycompetitiveandrealizemaximumvaluefromitssystemswoulddowell
totakealookatERPcloudbasedsystemsandexaminehowtheymightfitintoastrategyfor
modernizingITandmaximizingbusinessvalueandcompetitiveadvantagefromallenterprise
systems.Thisevaluationisanessentialactivityforamodern,growingbusinessinachanging
businessworld.

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